5 year fixed - would you?

Ameba

Hi All,

Just a quick one, would you fix your mortgage for 5 years? 

Considering options and this one seems the most reasonable and affordable but ... thinking maybe these are being offered at competitive rates because banks are predicting significant decrease in interest rates and want to attract people to longer term mortgages?

Honestly, losing my mind over this. What are your views guys? 

5 Yr fixed 4.09% at 752/month/no fee

5 Yr fixed 3.99% at 748/month/999 fee

2 Yr fixed 4.49% at 790/month/no fee

3 Yr fixed 4.49% at 790/month/no fee

Greatful for any comments and advice :-)

ACG

The expectation is that the base rate will drop next year. 

If what is predicted to happen happens, you would be quids in in the early years of the 5 year fix but then worse off in the latter years, where it averages out though is anyones guess. 

I did a 5 year fix in April last year, but obviously rates were a bit lower then. 

Of those options on a personal level, I would be looking at the 4.09% deal or the 2 year fix if I was feeling brave and expecting rates to come down. On a professional level, I would be looking at what your plans are and what is important to you - risk it for a biscuit (2/3 year fix) or take the insurance policy (5 year fix). 

K_S

Ameba said:

Hi All,

Just a quick one, would you fix your mortgage for 5 years? 

Considering options and this one seems the most reasonable and affordable but ... thinking maybe these are being offered at competitive rates because banks are predicting significant decrease in interest rates and want to attract people to longer term mortgages?

Honestly, losing my mind over this. What are your views guys? 

5 Yr fixed 4.09% at 752/month/no fee

5 Yr fixed 3.99% at 748/month/999 fee

2 Yr fixed 4.49% at 790/month/no fee

3 Yr fixed 4.49% at 790/month/no fee

Greatful for any comments and advice :-)

@ameba The approximately 0.5% difference in rates between 2 and 5 year fixes is largely reflective of the difference in 2 and 5 year swap rates (a proxy for lender funding costs).

To answer your question, unless you have a firm belief re which direction rates will take, the decision should probably be based more on your attitude to risk and whether or not your finances could absorb a further hike in rates in 2 years time.

RelievedSheff

It is very much dependant on your personal view on risk.

For us we prefer the certainty of knowing what our repayments will be so we would opt for the 5 year fix. 

Charlotte_Brown

We're going through something similar ourselves. We wanted a 2 yr fixed but have only been offered 5. Based on assumption interest rates are going down next year this was frustrating... Buuuuut on the flip side we'll be paying off more of the mortgage when it does and like @RelievedSheff above, its good to know what the payments will be for the foreseeable. So maybe 5yr not so bad after all 

dunstonh

Considering options and this one seems the most reasonable and affordable but ... thinking maybe these are being offered at competitive rates because banks are predicting significant decrease in interest rates and want to attract people to longer term mortgages?

The interest rates are based on assumptions in the swap rates.    However, swap rate assumptions have been mostly wrong for the last 9 months.     

History tells us that what happens will be different to predictions of what will happen. Largely due to unknown events causing modelling to change.

So, make your best guess but remember that fixed rate mortgages are not about getting the best rate but giving you certainty.   

born_again

Go for the 5 year if that suits you.
No one can say what is going to happen in the future. 
Just look what happened in 2020, then in 2022... No one predicted either of them.

Just fixed for 5 here. Would rather have the certainty of knowing costs in that period, rather than trying to think of having to go through the same in another 2 to 3 years. 

Ameba

Hey All,

Many thanks for sharing your thoughts.
We've gone for the 4.09% 5 Yr fixed. Let's see how it goes in the longer term... 😉

bamgbost

Hi there
We are in a very similar situation and went for the 5 year option. So I dont blame you at all.

Our Mortgage is significantly higher tho, and the difference was larger. 4.09 vs 4.89 for 2 years. 

We dont have to change til Nov 1st. So if the rates do move in our favour can secure a better rate beforehand.

Atomix

What if interest rates actually keep increasing - because inflation doesnt come down - in x2 years its at 6%. That deal will look v good indeed… just a scenario

TheJP

Charlotte_Brown said:

We're going through something similar ourselves. We wanted a 2 yr fixed but have only been offered 5. Based on assumption interest rates are going down next year this was frustrating... Buuuuut on the flip side we'll be paying off more of the mortgage when it does and like @RelievedSheff above, its good to know what the payments will be for the foreseeable. So maybe 5yr not so bad after all 

How does this work? Surely you'll be paying the same off the mortgage throughout, when interest rates drop yours wont, youn always pay the fixed rate of interest for the 5 years.